Karachi: The State Bank of Pakistan (SBP) on Monday raised its policy rate by 50bps to 12 percent, the first rise since April 2026.
Following the MPC meeting in Karachi, SBP Governor Jameel Ahmad revealed that nine MPC members voted to raise the policy rate, while one member voted for a larger increase.
The rate increase was based on a worsening inflation outlook caused by geopolitics, the central bank announced. The Governor attributed the price increases to the US-Israel conflict with Iran and Middle East tensions, which have led to crudes prices above $100 a barrel.
“Geopolitical factors contributed to inflation,” Ahmad said. “But at the same time, domestic factors have contributed to inflation, like the increase in the price of wheat in the last two or three months.”
SBP says that headline inflation increased to 11.1 percent in August before declining to 10.26 per cent in September, remaining significantly higher than the medium-term target of 5-7 per cent. Consumer and business inflation expectations have also increased.
In its statement, the MPC said: “Although the consequences of the global shock have so far been limited due to policy actions and prudent macroeconomic management, the risks to inflation, the current account and growth have risen.
The rate increase was implemented to contain any second-round effects of the supply shock and keep inflation expectations anchored, the MPC said.
On the economic side, the SBP kept its forecast of 3.5 per cent to 4.5 per cent growth for FY 2026-27. Export: $32.5 billion, imports: $71 billion and Workers’ remittances: $45 billion. FX reserves remain around $21.5 billion.
The last time the rate was increased by 100bps to 11.5% was in April 2026, which marked the first hike in almost three years, following a total reduction of 1050bps from the all-time high of 22% recorded in June 2023. The current rate will be in force from October 27, 2026.
